Net income in the three months ended Sept. 30 rose to S$730
million ($588 million) from S$707 million a year earlier, the
Singapore-based lender said in a statement to the city’s stock
exchange today. That beat the S$707 million average of nine
analysts’ estimates compiled by Bloomberg.

UOB joins Singapore competitors DBS Group Holdings Ltd. and
Oversea-Chinese Banking Corp., which last week reported earnings
that surpassed analysts’ estimates. Investors in UOB have
focused less on Singapore’s operating environment, where banks
have the lowest average net interest margins in Southeast Asia,
and more on the strength of the bank’s balance sheet and
management, said Macquarie Capital Securities Singapore Pte.

“It’s a kind of bank that investors can hold on to for a
longer period of time as they tend to be more circumspect rather
than aggressive when things are going good,” Matthew Smith, an
analyst at Macquarie, said by phone today. He had estimated
profit of S$741 million for the lender.

The bank’s loan book grew 16 percent in the quarter to
S$173.5 billion from a year earlier, driven by a 31 percent jump
in lending for manufacturing and a 20 percent increase each to
the construction industry and general commerce. Net interest
income, the difference between what UOB makes from loans and
pays on deposits, gained 7.7 percent from a year earlier to
S$1.05 billion.

Bank Founder

Shares of the bank have risen 5 percent this year, compared
with a 1.2 percent advance for Singapore’s Straits Times Index.
UOB trades for 1.4 times its book value, the same as the
benchmark stock gauge, data compiled by Bloomberg show.

UOB is majority-owned by Singapore’s Wee family, which
controls companies in industries from property to health care.
Wee Ee Cheong, a grandson of the bank’s founder, is its deputy
chairman and chief executive officer.

UOB’s net interest margin was 1.71 percent at the end of
the quarter. While that was lower than 1.84 percent a year
earlier, the figure was the same as the previous quarter. DBS
and OCBC reported margins for the period of 1.6 percent and 1.63
percent respectively.

“Although they’re not going up, they’re not going down,”
said Smith. “You’ll have to look at that as a positive.”

Overseas Acquisitions

Singaporean banks are mulling overseas expansion plans to
offset declining lending margins. OCBC is considering a bid for
Hong Kong’s Wing Hang Bank Ltd., people familiar with the matter
said on Oct. 24. UOB made an initial offer for Wing Hang, though
the companies aren’t currently in talks, people with knowledge
of the matter have said.

“They don’t tend to engage in overpriced mergers and
acquisitions,” Macquarie’s Smith said before the results. “I
can’t find an example of where they have done that.”

Banks in Hong Kong have an average net interest margin of
1.73 percent, lower than Singapore’s 1.78 percent, according to
data compiled by Bloomberg. While Singaporean margins are
higher, the Chinese city is seen by lenders as a gateway to the
mainland and a way to benefit from the country’s efforts to
increase the global use of the yuan.

UOB’s revenue from fees and commissions derived from
services including credit cards and fund management advanced 9.2
percent in the third quarter to S$407 million from a year
earlier. Other non-interest income contracted 34.2 percent to
S$211 million due to lower gains from the sale of securities.